Crowdfunding: A help or hindrance?

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Financial Post | Rick Spence | @rickspence | Jan 23, 2014

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Digital technology is changing the way entrepreneurs and new products get funded. But is crowdfunding — today’s best-known and most-hyped finding tool — the best way to go?

At a recent conference at the University of Toronto’s Rotman School of Management, a wide range of experts discussed today’s financial channels, and what surprises the future is likely to bring. Here’s your hacker’s guide to some of their points of view.

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Entrepreneur Ben Grynol of Winnipeg-based Top & Derby, an online purveyor of designer walking canes, described his company’s experience with crowdfunding. Last April, Top & Derby set out to raise US$20,000 in a month-long campaign on the crowdfunding platform Indiegogo.  It was a merch-for-cash deal typical of the period: backers who pledged US$70 to the company would receive a free cane. For US$200, you got three canes. For US$25, you got a set of coasters.

Top & Derby raised US$22,000 from buyers in nine countries. The campaign generated lots of media coverage and global awareness, but more to the point, Grynol said, “The campaign was great proof-of-concept for us.” After spending a minimal amount to produce a “minimal viable product,” it proved people would buy their aesthetic-oriented products. That finding motivated the company’s three founders to invest more funds in their project, and they are now looking at creating new design-influenced healthcare products.

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Grynol says his company learned four key lessons about making crowdfunding work.

Establish partnerships Know who is going to produce the product for you.

Get firm quotes from suppliers “so the economics of the campaign are not compromised.” Otherwise, suppliers who know you are obligated to fulfill these orders may suddenly tell you their prices have doubled.

Set a realistic funding goal “It’s better to exceed a low goal than miss a high goal.”

Use accurate timelines It takes six to 12 months to plan a crowdfunding campaign, and then additional time to contract production and ship, Grynol said. “Most [crowdfunding] companies that get funded miss their deadlines.”

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us | Prezi or contact us at casano@ncfacanada.org.

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